Insights

The Future for Developer Contributions

Alongside the release of the draft revised National Planning Policy Framework, the Government recently consulted on its proposals for reforming developer contributions to affordable housing and infrastructure entitled “Supporting housing delivery through developer contributions".

The proposed suite of changes to the Community Infrastructure Levy (CIL) regime and contributions through section 106 planning obligations is intended to reduce complexity and provide more certainty and transparency within the current system. The overarching aim is to encourage increased development in order to achieve the Government’s target of delivering 300,000 homes a year. We set out below a summary of the key changes proposed and what the future might look like for developer contributions.

Setting CIL Charging Schedules

Local authorities are currently required to undertake two consultations and a public examination in order to introduce or review a CIL charging schedule. The arduous process not only discourages the adoption of CIL for some authorities, but also hinders the process of revising CIL charging schedules.

The Government proposes to replace the requirement for two consultations with an obligation on local authorities to publish a Statement of Engagement, confirming they have sought an appropriate level of public engagement. The intention is that this will encourage the uptake of CIL and make it easier for authorities to revise existing CIL rates in response to market conditions.

In line with the Government’s objectives under the revised National Planning Policy Framework to streamline the plan making process, the document suggests that information required for plan making in respect of viability should also be used to establish appropriate CIL rates.

There are also proposals for authorities to charge different CIL rates for the same proposed use based on the existing use of the land, to allow authorities to capture land value generated through planning permissions (i.e. a higher CIL rate for existing uses with lower land value). For strategic sites with numerous uses, a single CIL rate would be encouraged. For other sites, the relevant use could be the majority existing use, or CIL could be apportioned between existing uses. The Government has sought comments as to what would be the best approach.

Indexation

As part of the aim to make CIL more responsive to changes in market conditions, the Government propose to amend the current regulations whereby CIL is indexed to build costs, which do not necessarily relate to changes in house prices.

CIL on residential development would instead be indexed to the regional or local house prices index and non-residential development to the Consumer Price Index, or a combination of the Consumer Price Index and the House Price Index. The intention is that this would reduce the need for variation of charging schedules. The new provisions relating to indexation would apply from the date the amended regulations come into force.

Lifting Pooling Restrictions

Under Regulation 123 of the Community Infrastructure Levy Regulations 2010 (CIL Regulations) local authorities are prohibited from using more than five individual planning obligation contributions to fund a single infrastructure project. This restriction has been found to delay development and even lead to otherwise acceptable sites being rejected for planning permission.

Proposals are made therefore to lift the restriction in respect of areas that have adopted CIL or where it would not be feasible to adopt CIL. Proposals are also made to lift the restriction where development is planned for several large strategic sites – a number of options are put forward for how this would work in practice.

The Government proposes to abolish Regulation 123 Lists - whereby local authorities publish lists of the infrastructure they intend to fund through CIL and authorities cannot then collect section 106 contributions towards infrastructure on such lists. Ambiguity in the CIL Regulations has meant these lists tend to vary in detail and content between authorities. This is compounded by the fact that they can be updated at any time without consultation by the authorities and there is little certainty provided to developers or communities as to how CIL is intended or indeed has been spent.

Regulation 123 Lists would be replaced with a more standardised approach, requiring local authorities to publish annual Infrastructure Funding Statements. These would explain how CIL and income from section 106 planning obligations are to be prioritised over the next five years. Authorities would also be required to report on how income from developer contributions over the previous year has been spent, thus increasing transparency and accountability.

Introduction of the Strategic Infrastructure Tariff

The Government proposes to allow combined authorities and joint committees with strategic planning powers to introduce a Strategic Infrastructure Tariff, where there is a need for funding for a piece of strategic infrastructure. This would function in much the same way as Mayoral CIL collected towards Crossrail in London, including providing for the same exemptions as set out in the CIL Regulations.

Improvements to the operation of CIL

Further proposals are made in respect of the operation of CIL. For example, allowing exemptions from CIL to apply where a Commencement Notice is served up to two months late and extending abatement provisions to phased planning permissions pre-dating the adoption of CIL, which are varied under section 73 of the Town and Country Planning Act 1990. The Government is also seeking views on whether authorities may need to obtain funds for monitoring planning obligations as part of a section 106 agreement (despite the fact that most authorities already do so, contrary to principles established in case law).

Conclusion

The deadline for responses to the consultation is 10 May 2018 and if the reforms are adopted, updated regulations are expected in Summer 2018. It is doubtful, however, that these reforms will achieve the Government’s goal of demystifying the complexities associated with the current system and providing more certainty for developers, local authorities and the community as a whole. This is largely dependent on the certainty provided by any changes to the CIL Regulations and planning guidance.

Importantly, the consultation document sets out in no uncertain terms that these changes are intended to provide continuity for developers in the short term. Suggestions are made that it will provide a platform for further reform, for example, for contributions to affordable housing and infrastructure to be set nationally and made non-negotiable. Whilst there are no current proposals for fundamental review of the system, it is an indication of the Government’s thinking as to what the future might hold.

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